Worsening bottom line makes it harder firms to invest in 5GBy Baek Byung-yeulSK Telecom, KT and LG Uplus are going into a belt-tightening mode, while at the same time they are set to invest trillions of won in fifth-generation (5G) infrastructure, as they have faced worsening profitability due to the government's push to cut mobile charges.Despite the worsening bottom line, the companies are set to spend billions of dollars to purchase fifth-generation (5G) equipment and lay down the necessary communication infrastructure, which will further aggravate their financial soundness.According to data from the Ministry of Science and ICT, the three mobile carriers are planning to invest a total 7.47 trillion won ($6.56 billion) in 5G infrastructure from 2019 to 2023. Korea has set its goal to commercialize the super-fast network service by next March, but the telecom firms said their worsened profitability has made it hard for them to invest more in the 5G network.Given they invested about 20 trillion won in the fourth-generation (4G) LTE network service over eight years, the investment seems way smaller. An industry official familiar with the matter said the performance deterioration of mobile carriers has led them to passive investment."To make the 5G network service possible by March next year, telecom firms are required to increase investment in capital expenditure by 1.5 to 2 times," the official said.In response to the government's pressure for mobile fee cuts, the telecom firms already increase the ceiling of discounts given to 25 percent, up 5 percent from the previous discount rate. They also implemented extra plans to cut mobile bills for low-income families and senior citizens.The belt-tightening efforts are likely to begin from reducing marketing expenditure. An LG Uplus official said the company is considering cutting its marketing expenses in financing the 5G network service. SK Telecom and KT are reportedly mulling over this as well.In 2017, the three telecom firms spent 7.95 trillion won, 2.28 times their operating profit of 3.49 trillion won, according to data from the Ministry of Science and ICT. By company, SK Telecom spent 3.12 trillion won, KT 2.68 trillion won, and LG Uplus 2.15 trillion won.Due to the reduced mobile fees, telecom firms are expected to report a sluggish performance in the third quarter, according to securities firms.In the July-September period, SK Telecom is expected to post sales of 4.1 trillion won and an operating profit of around 300 billion won, both down about 7 percent and 20 percent year-on-year.KT is expected to log 5.7 trillion won in sales and 330 billion won in operating profit, down 0.6 percent and 11 percent year-on-year. LG Uplus is likely to retain a similar performance compared with last year's third quarter with 3.03 trillion won in sales and 200 billion won, operating profit.An analyst attributed the worsened performance is mainly due to the government's policy to cut mobile fees. "The 25 percent discount affected the performance of mobile firms bigger than was estimated," said Choi Nam-gon, an analyst at Yuanta Securities. "Also, the discount program for low-income families led to the performance deterioration of the firms."Industry analysts pointed out the government needs to enhance its investment in 5G. KT Chairman Hwang Chang-gyu urged the government and telecom firms to work closely in preparation for the upcoming 5G during a National Assembly audit, Oct. 10.Speaking of choosing its partner firms for 5G network equipments, Hwang said KT would announce its picks within this week."We will make the announcement soon and it will be possible within a week," Hwang told reporters in Boston on Oct. 25. Hwang visited the U.S. city to deliver a special speech at Harvard Business School.Asked whether it would use equipment from China's Huawei Technologies, which has been embroiled in controversy over security issues in the U.S. and Australia, Hwang said, "The final decision will be made based on the strict standards provided by the government." SK Telecom has already excluded Huawei from its proffered bidder list while LG Uplus said it would adopt equipment from the Chinese firm. Hwang added that KT would launch the 5G service in March as scheduled.